Breakingviews - As Trump goes low, Fed goes high

Jerome H. Powell, a governor on the board of the Federal Reserve System, prepares to testify to the Senate Banking Committee on Capitol Hill in Washington, U.S., June 22, 2017. REUTERS/Joshua Roberts

WASHINGTON (Reuters Breakingviews) - To paraphrase former U.S. first lady Michelle Obama, as Donald Trump goes low, the Federal Reserve goes high. U.S. central bank chief Jerome Powell on Friday told the annual Jackson Hole monetary-policy confab that he sees little risk of economic overheating, indicating the Fed will raise interest rates again. The remarks were his first in public since the U.S. president took a swipe at Powell’s policies.

Fed watchers were eager to see if there would be any drama at the normally staid Jackson Hole event, organized by the Fed’s Kansas City branch. On Monday, Trump said he was “not thrilled” with the Fed raising interest rates twice so far under Powell’s leadership. The president said he should be given some help by the Fed through accommodative policy as he negotiates trade deals, adding that the central bank should do “what’s good for the country.”

On Friday, Powell talked about inflation and unemployment and did not allude to the president’s comments. Yet he made clear he held the same views as before. As he has said previously, Powell noted the economy is strong and there’s little risk of inflation overshooting the Fed’s 2 percent target. The signs are that the central bank will probably raise rates in September, and could do so again in December.

Powell, who was appointed by Trump, has previously talked about the importance of the Fed’s independence. By ignoring Trump, he showed he’s largely impervious to the U.S. president’s barbs. With uncertainty surrounding U.S. trade policy – a potential concern of some Fed officials, revealed in the minutes of the last rate-setting meeting that were released this week – investors can at least count on a steady Fed.

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